Q3 2021 Buckle Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to Buckle third quarter earnings release at this point all the participant lines are in a listen only mode. However, there will be an opportunity for your questions instructions will be given at that time. As a reminder, this call is being recorded members of buckles management on the call today are Dennis Nelson.
President and CEO, Tom Heacock, Senior Vice President of Finance Treasurer, and CFO, Kelly music, Vice President of women's merchandising, Bob Carlberg, Senior Vice President of men's merchandising and Brady Fritz Vice President General Counsel and corporate Secretary as they review the operating.
Results for the third quarter, which ended October 30th they would like to reiterate their policy of not giving future sales or earnings guidance and have the following safe Harbor statement.
Safe Harbor statement under the private Securities Litigation Reform Act of 1995, all forward looking statements made by the company involve material risks and uncertainties and are subject to change based on factors, which may beyond the companys control.
Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward looking statements. Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission. The company does not undertake to publicly update or revise.
Any forward looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's Cordilleras conference calls without us.
Express written consent.
Any unauthorized reproductions or recordings of the calls should not be relied upon as the information may be inaccurate with that I'll turn it over to Mr. Tom Heacock. Please go ahead Sir.
Good morning, and thanks for being with US this morning.
Remember 19th 2021 press release reported that net income for the 13 week third quarter ended October 32021 was $62 2 million or $1 26 per share on a diluted basis compared with net income of $41 6 million or <unk> 85 on a diluted basis for the prior year 13 week.
Third quarter, which ended October 31 2020.
Year to date net income for the 39 week period ended October 30 of 2021 was $170 9 million or $3 46 per share on a diluted basis.
Compared to net income of $64 5 million or $1 32 per share on a diluted basis for the prior year 39 week period ended October 31 2020.
Net sales for the 13 week third quarter increased 27, 3%.
$319 4 million compared to net sales of 251 million for the prior year 13 week third quarter comp.
Comparable store sales for the quarter increased 27, 3% in comparison to the same 13 week period in the prior year and online sales increased 9% to $55 million.
Year to date net sales increased 56, 9% to $913 7 million for the 39 week fiscal period ended October 32021, compared with net sales of $582 4 million for the prior year 39 week fiscal period ended October 31 2020.
Comparable store sales for the year to date period were up 56, 7% in comparison to the same 39 week during the prior year and online sales year to date increased 18, 7% to $147 7 million.
For the quarter <unk> decreased approximately three 5% the average unit retail increased approximately 1% and the average transaction value decreased about two 5%.
Year to date <unk> decreased approximately 3% the average unit retail increased approximately two 5% and the average transaction value decreased approximately 5%.
Gross margin for the quarter was 54% up from 36, 6% in the third quarter of 2020.
Our year to date gross margin was 49, 3% compared to 47% for the same period last year.
The third quarter increase in gross margin was the result of a 65 basis point improvement in merchandise margins.
<unk> was 315 basis points of leverage occupancy buying and distribution costs as a result of our strong sales performance for the quarter.
Selling general and administrative expenses for the quarter were 24, 7% of net sales compared to 25% for the third quarter of 2020.
And year to date SG&A was 24, 6% of net sales down from 26, 4% for the same period last year.
The third quarter decrease was due to a 90 basis point decrease in store labor related expenses, and 85 basis points of leverage across several other SG&A expenses.
Which were partially offset by a 145 basis point increase in incentive and equity compensation accruals.
Our operating margin for the quarter was 25, 7% compared to 21, 6% for the third quarter of fiscal 2020 for the year to date period, our operating margin was 24, 7% compared to 14, 3% for the same period last year.
Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24, 5%, bringing third quarter net income to $62 2 million for fiscal 2021 versus $41 6 million for fiscal 2020.
Income tax expense as a percentage of pretax net income for both the current and prior year year to date periods was also 24, 5%.
Bringing year to date net income to $170 9 million for 2021 compared to $64 5 million.
For fiscal 2020.
Our press release also included a balance sheet as of October 32021, which included the following inventory of $100 6 million, which was down from inventory of $118 7 million as of October 31, 2020, and total cash and investments of $500 1 million.
We ended the quarter with $99 3 million in fixed assets net of accumulated depreciation.
Our capital expenditures for the quarter were $3 million.
And depreciation expense was $4 3 million for.
For the year to date period capital expenditures were $12 2 million and depreciation expense was $14 million.
Year to date capital spending is broken down as follows $11 5 million for new store construction store Remodels and technology upgrades and <unk> 7 million for capital spending at the corporate headquarters and distribution Center.
During the quarter, we completed three full remodels each of which were relocations into new outdoor shopping centers and closed one store.
This brings our year to date totals to one new store 10, full remodels and three store closures.
For the remainder of the year, we anticipate completing eight additional full remodeling projects.
Based on current store plans, we now expect our capital expenditures to be in the range of $17 million to $20 million, which includes both planned store projects and it investments.
Buckle ended the quarter with 441 retail stores in 42 states.
Paired with 446 stores in 42 states at the end of the third quarter last year and now I will turn it over to Kelly <unk>, Vice President of women's merchandising.
Thanks, Tom.
I'd like to start by highlighting the performance of our women's merchandise categories for the quarter women's merchandise sales for the fiscal quarter were up approximately 26% against the prior year fiscal quarter.
Quarter, our women's business was approximately 48% of sales compared to 48, 5% in the prior year.
Average denim price points decreased from $75.15 in the third quarter of fiscal 2020 to $74 25 in the third quarter of fiscal 'twenty, one and overall average women's price points increased about three 5% from $44.10 to <unk> 45.
And 65 cents Eric.
We are excited to report another strong quarter of lending business. We continued to see a nice response to our denim selection as we expanded into more fits provided an expanded range of bottom openings and continued to build upon our private label assortment.
As with many other categories new arrivals for denim were heavily impacted by supply chain disruptions particular deliveries from our higher price point denim brands like rock Revival and Miss me were impacted the most broad closures in Vietnam.
Our other net and brands also saw slight delays in shipping during the quarter.
For other categories products that the fashion there performed best Platts.
Third layers grassy tops graphic Tees and.
And fashion accessories were key drivers we remain focused on building our private label selection across all categories. While also continuing to introduce new brands and strategic markets.
Our youth business continues to build with denim and knits driving sales.
Are you offering that same unique mix that we do in our women's product has been well received.
Let the ongoing supply chain challenges, we continue to work very closely with all of our manufacturers and brand partners to minimize the potential impacts are unique assortment sourced from a variety of brands and vendor partners enables us to be agile in our planning and buying.
As a result as a result of site disruptions are to our plan, we were able to react quickly to the changing environment and still deliver newness across the OLED business. Additionally, our strong sell through performance created opportunities for us to add an existing in season product.
Whereas the category category, where being diversified in our brands and looks great.
Greatly benefited our ability to continue to drive sales in spite of some challenges in getting new receipts.
Land from brands like Hey, Dude in cereal.
It's important to again, thank our vendors and brands for their partnership as we are all are challenged to work a little bit differently.
And to the women's buying team I honestly cannot give them enough credit for all of their hard work and hustle to stay on top of an ever changing time in retail.
And with that I will turn it over to Bob Carlberg, Senior Vice President of men's merchandising to discuss the performance of our men's merchandise category.
Thank you Kelly men's merchandise sales for the fiscal quarter were up 28% against the prior year fiscal quarter for the quarter. Our men's business was approximately 52% of net sales compared to 51, 5% in the prior year.
Average denim price points decreased from $84 60 in the third quarter of fiscal 2020 to $81 55 in the third quarter of fiscal 2021.
And overall average men's price points decreased about 1% from $49, 55% to $49 15.
Our men's business had another outstanding quarter with unit sales in each department up over 20% demand was strong across all brands and lifestyles. One of buckles greatest strengths is the diversity of guests. We can serve if one brand or lifestyle is late we are able to help the guest E substitution that makes sense for them or new color palettes fabrics and styles across all categories.
Were very well received by our guests.
As we all know getting product to our doors has taken more planning and work than ever our team and partners have managed it very well and we have been catching up on inventory month to month as we move through fall and prepare for holiday.
Outside of Rock Revival denim, we had very little mens product disrupted by the country wide shutdowns in Vietnam, even with a large delay in our rock deliveries. We continued growing denim in the double digits with denim being the largest dollar gain followed by net.
During the quarter, our salvage brand was even stronger than normal as a strong substitute for rock denim.
In other categories and it's in the other categories, our highest growth within nets as we have our best inventory position, there and continue to expand our brands and lifestyles.
Our private brands have grown and breadth and in volume as we cover every niche and lifestyle across our collections I want to mention our button front business that was most impacted earlier by Covid has come roaring back button fronts like outerwear and sweaters are dominated by our private brands.
Now turning to results on a combined basis accessory sales for the fiscal quarter were up approximately 27, 5% against the prior year fiscal quarter and footwear sales were up about 23%.
These two categories accounted for approximately eight five and nine 5% respectively of third quarter net sales.
Which compares to eight 5% and 10% for each in the third quarter of fiscal 2020.
Average accessory price points were up approximately 7% and average football footwear price points were up about five <unk>.
Again on a combined basis for the quarter denim accounted for approximately 41, 5% of sales and tops accounted for approximately 32.
This compares to 42% and 32% for each in the third quarter of fiscal 2020.
For the quarter, our private label business increased to 44% of sales compared with 39% in the third quarter of 2020.
With this being my final earnings call before retiring at the end of our fiscal year I want to take the opportunity to thank Dennis and buckled teammates past and present for such an incredible journey I'll Miss the excitement of the business and the culture that Dennis and many other great people have created.
I also wanted to specifically thank the <unk> team has been a joy to work with each of them.
Talent creativity and drive of enabled us to succeed in the face of such adversity over the past few years that have positioned us well to further capitalize on the opportunities ahead.
The future looks bright and I look forward to watching where you take us and with that we welcome your questions. Thank you.
And ladies and gentlemen, if you do wish to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the ones Youre command and if youre using a speakerphone. Please pick up your handset before pressing the numbers. Once again, if you have a question you May press one.
Then zero at this time.
Okay.
Yes.
And first in the line of Jon Braatz with Kansas City Capital. Please go ahead good.
Good morning, everyone.
Dennis.
What do you see maybe in a head in 2022 in terms of.
New stores, maybe the.
Future of Buckle youth stores and so on.
Obviously, you have a nice cash position would you anticipate.
Much in terms of new stores going forward.
Good morning, John.
I wanted to take a moment before answering your question is this is bobs last earning call I would like to thank Bob for his 38 outstanding years as the buckle.
Bob is a very talented merchant has developed an excellent men's merchandise team.
And he's been a great partner and we appreciate all he has accomplished at the buckle.
And we want to wish Bob all the best in the future.
John We do have one new store planned for 2022.
The used stores, we will expand our inventory selection in our stores, although we don't have a specific use store planned to open.
Separate from our regular store.
There are also over the next year and a half then have 20 plus.
Relocation remodels of stores.
Are those are they are the majority of those will be moving from probably mall locations to outdoor centers are shopping strip centers, where we will have.
The exposure on the street with our guests and we've had some very good success in the past two years, making those changes so thank you okay Dennis.
When you.
With regards to the excuse me the buckle youth merchandise when you.
When you put that merchandise into a store.
Are you taking out merchandise I'm trying to get sort of an incremental impact that that they use.
Segment is having on your stores.
No in the majority of stores, we are not taking out product.
And the good news about our relocations and the majority of our relocations, we are expanding store.
Size by.
At least 1000 square feet.
Lot of cases, and so that makes a very.
Yes, good way for us to expand that selection without adding.
More store personnel for a separate store and and saving the expense of the separate buildout.
Okay. One last question you know when you know.
This year has been an extraordinary year.
For everybody and.
I'll have to give it every.
You and your team credit because you've I think you've executed all compete it.
Your competitors, but obviously there were some macro <unk>.
<unk> said helped everybody and you know when you look looking to 2022 and beyond.
And look where you are today.
How much do you think maybe some of the things that you've done are sustainable in terms of our higher margin, obviously youre going to be up around 25% and you go back a couple of euros at.
2013, 2014 year up 22%.
Or are some of these things that you've done how will you be able to retain and.
Keep margins a little bit higher than maybe what we've seen in the past.
Well, we won't make any predictions, but we have a.
A lot of good things go and we have great excitement in the stores very talented teammates.
With our store managers and their leaders in the stores. Our merchandise teams are very strong and they are great at knowing our guest.
Our marketing has improved we have substantially.
More new guests each quarter than the previous year.
And a strong support staff here at the office. So we have a lot of things to be excited about and.
I think even in 2019, we were starting to make progress on a lot of our.
Investments changes our focus has always been to have continued improvement within our company.
And I want to thank our all of our teammates and.
And staff for for all their hard work and I appreciate what they're doing because we will take our continued focus on improving and improving our guest service our presentation of the product.
And over time.
This continued improvements.
I compound interest, we regained for online and get stronger as we grow so that's kind of our approach and we think we will continue to.
Do well.
Alright, Thank you Dennis.
Yes.
Our next question from Peter Versace, with <unk> Capital Management. Please go ahead.
Good morning, Thanks for taking my call.
Couple of questions I think I heard you say that your SG&A was actually.
Down this quarter are you guys experiencing any kind of wage inflation at the store level or in distribution.
Our model in the store what were primarily for most of our teammates our base plus a commission. So there is natural increases in wage and a lot of our teammates are doing really well with the strong business we're seeing.
And a lot of areas and you read the press and in our experience has been no different that it's incredibly incredibly.
Competitive for talent. So we have had to make some adjustments to wages here.
For some of our positions in the office of the same for some of our positions in the store I mean recruiting is a constant focus, especially in our our fulfillment centers here for ecommerce sales in our distribution center and we've also had a.
A really strong focus on on recruiting through the fall in the stores and that's been really successful we had some added incentives for both referrals in new applicants and are really in a good spot there.
Great great. Thanks for that.
I'm sorry go ahead.
All things considered.
Sure.
And speaking of your sales associates, you guys have always been.
Great with having your in store associate spending time with customers to make sure they've got the right fit the right brand for them personally.
I was just wondering if you can give me some color on how that squares with your online sales increasing.
So fairly dramatically are people buying online and then coming in for more custom fit if they if they're not happy when they get it at home or.
How do you think about that.
I think the.
We have a lot of guests that shop online and then come into the store to find what they would like best and then as they become they find their favorite fits.
<unk> of our stores and so then they're more comfortable ordering online because they know that our quality and consistency in the fitting.
Works, well Forum and we're always there and also we started testing in 2019, the ship from store and expanded that last year as the.
Business.
<unk> grew during the year and Thats been a.
A big help to our E com business as you know.
Our third quarter over over 2019.
E Com was up 81%.
So I think second quarter was up 94% so.
A combination of things that are working very well there.
Great great.
One final question, how do you feel about having ample inventory for holiday.
Uh huh.
Well, we're hoping that we keep the flow knowing that mean list.
Up 27% in the third quarter we.
We're able to get our.
Our inventory was still down in the high teens.
It had been running down over 20%.
With the.
The success of the stores in our business.
And difficult to catch up but it did problem and we're still working hard and if we get.
Everything coming in that's planned we should should be able to offer a nice selection.
Great well, thanks, again, and congratulations on a fantastic quarter.
Thank you Peter take care.
Yeah.
And ladies and gentlemen, just a quick reminder, if you do have a question. Please press one then zero at this time.
Okay.
And we do have a question from the line of Steve Marotta with C. L. King and associates. Please go ahead.
Good morning, Dennis I, just wanted to follow up on that last question regarding the supply chain in general how would you say it is for both private label and branded items compared to three months ago.
Good morning, Steve.
Yeah.
You know, it's a little difficult to call out I think some of our vendors.
We're in a pretty good ship shape on shipping.
On product.
And now there is still out of the challenge I would say, it's slightly improved but still a challenge.
Okay. That's helpful. And also can you update us on any digital initiatives that launched over the last three months.
And that has helped you to connect digitally with your customers and have them transact digitally.
Denis mentioned this is Tom, but Dennis mentioned a lot of the heavy lifting for for omni initiatives was done prior to this year. So in terms of.
Opening up the availability of in store inventory for online purchase still the browser inventory buy online pickup in store ship from store those were all which.
Which were a lot of our big biggest initiatives. This year I mean, we have a tool that we're rolling out and experimenting with and implementing and hoping to grow where our teammates in the stores have the ability to take their service to the guests. So it's really.
Bridging that gap between between teammates in the stores and online and taking that service to the guests wherever they are.
<unk> been well received we hope to continue to grow that.
Continue to look at payment options, we've added payment options and added after pay both both in store and online during the quarter.
Those are probably some of our more significant initiatives this year.
Although that's been well received.
<unk> growth both online and in store I think its a function of all of those investments.
That's helpful. Thank you.
Okay.
And allowing a few moments we have no further questions in queue.
Okay.
Okay.
There are no questions, we can wrap it up for today. So thank you everybody for being on the call and participating and have a wonderful day.
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